Mini-Budget: Kwasi Kwarteng announces cut in stamp duty
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Stamp duty is the tax homeowners have to pay when they buy a property, and the amount to be paid depends on the property cost. On Friday, Chancellor Kwasi Kwarteng announced permanent cuts to the stamp duty tax across England and Northern Ireland as part of the Government’s mini-budget, which have come into effect immediately.
Now, the price of a property at which stamp duty has to be paid has doubled from £125,000 to £250,000.
For first-time buyers, the threshold has increased from £300,000 to £425,000, while the maximum amount a first-time buyer can pay while remaining eligible for discounted stamp duty has increased to £625,000 – up from £500,000.
When announcing the cut, Mr Kwarteng told the House of Commons: “Home ownership is the most common route for people to own an asset, giving them a stake in the success of our economy and society.
“The steps we’ve taken mean that 200,000 more people will be taken out of paying stamp duty altogether.
“This is a permanent cut to stamp duty, effective from [Friday, September 23].”
What are the new stamp duty bands?
The rate of tax people will now pay stamp duty are as follows:
- On properties costing up to £250,000 (and £425,000 for first-time buyers) people will pay zero percent stamp duty tax
- On properties costing £250,000 – £925,000, people will pay five percent stamp duty tax
- On properties costing £925,000 – £1,500,000, people will pay 10 stamp duty percent tax
- On properties costing more than £1,500,000, people will pay 12 percent stamp duty tax
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When does stamp duty need to be paid?
People have 14 days to pay stamp duty from the date of property purchase completion in England and Northern Ireland.
In Scotland and Wales, people have 30 days to pay from the point of purchase. If it takes longer, people could face a fine or be charged interest on the duty they owe.
Jonathan Hopper, CEO of Garrington Property Finders, commented: “The Chancellor didn’t just pull one rabbit out of the hat. He released a whole hutch of them.
“The Stamp Duty cut is welcome in two ways. Firstly because its benefits are skewed toward first-time buyers, who are the ones being squeezed hardest by the mismatch between soaring house prices and average salaries that don’t come close to keeping up.
“Conventional wisdom is that if you can help more people onto the first rung of the property ladder, the benefits will ripple upwards across the market.
“The other reason to welcome today’s announcement is that it’s a permanent change to Stamp Duty, rather than a temporary, bubble-inducing holiday. Over time, the Investment Zones could trigger more housebuilding and inject extra energy into several regional markets, but this won’t happen overnight.”
However, Mr Hopper continued: “For all the smiles among estate agents today, no one should expect instant fireworks. With the Bank of England hiking interest rates again yesterday, mortgages are getting steadily more expensive – and mortgage costs and sentiment play a far bigger role than Stamp Duty in a would-be buyer’s decision-making process.
“That’s why the Chancellor’s announcement is like a gym cutting its joining fee but ramping up its monthly membership dues.
“It’s a headline-grabbing incentive, but with many buyers reassessing what they’re willing to pay in the face of a weakening economy, it won’t reverse the cooling of house price growth.”
Equally sceptical of the new legislation in conjunction with wider economic upheaval, Anthony Codling, CEO of property platform Twindig said: “The Chancellor’s mini-budget cut stamp duty today, not a holiday, nor a mini-break, but a permanent cut.
“Is this a case of actions speaking louder than his words about being closely coordinated with the Governor of the Bank of England, one seeking to control inflation while the other seems to be encouraging it? Time will tell if the mini-budget’s big gamble will pay off.”
Sheldon Cole, managing director of letting and property agency Holland Properties said: “It is great for the youth to get out of rent and own their first property and it certainly will take the pressure off the rental market. It will slow the prices increase for properties above the £450,000 bracket.
“Regarding the stamp duty cut itself, it is almost like your deposit saving has gone up by £24,000 for people in areas where the average house price is above £250,000.
“However, I am not sure how this can help with inflation. To reduce inflation, we need to stop printing money and help people spend less, with this incentive I believe we will see an increase in property acquisition.”
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